Price City Paid for Shaw Land Exceeded Inflated Appraisal

By S and ra EvansJune 4, 1986

The District government paid at least $1.5 million more to buy property in the Shaw area from developer Jeffrey N. Cohen than the property was worth, according to a new appraisal commissioned by the city.

In addition, D.C. City Council member John A. Wilson questioned the assumptions the city had the appraiser use in establishing the value of the property at $11 million, saying the value was inflated by the use of an unusual concept of the land's "development potential" rather than its current market value.

The appraiser's report said the evaluation was made on the "highest, best, most productive" use of the property as part of a proposed mixed-use development. It also assumed that zoning changes would be granted to allow for a more "appealing" land use and that the District government would provide subsidized financing for the project.

Wilson, chairman of the council's Finance and Revenue Committee, had asked to see the appraisal before deciding whether to support a Barry administration request for $9 million in industrial revenue bonds for part of the project, being developed by Cohen under a complex lease arrangement with the city.

Wilson said yesterday that he did not think he would support the bond issue, requested to finance the first phase of construction on the project, but might put it up for a committee vote later this month.

The city's complicated $12.5 million purchase of the property from Cohen, a close friend of Mayor Marion Barry, was first revealed in February 1985. The District government paid $11 million for the property plus $1.5 million in interest to a consortium of local banks that financed the deal.

The District government closed the transaction without first conducting its own appraisal, but relied instead on one prepared for a partnership controlled by Cohen. At the time, the city's assessed value of the property was less than $7 million.

After purchasing the property, including the former Children's Hospital and Manhattan Laundry sites and other nearby parcels, the city entered into a lease arrangement with a local nonprofit group that then sublet the property to Cohen for redevelopment.

Cohen then asked the city for $5 million in industrial revenue bonds to finance construction of one part of the project, to turn the Manhattan Laundry site in the 1300 block of Florida Avenue NW into an office complex and storage facility. Last month, he raised that request to $9 million, which the Barry administration has supported in hearings before Wilson's committee.

Cohen had said earlier that plans for the redevelopment projects, collectively called the Samuel C. Jackson Plaza, would be in jeopardy if the council did not approve the bonds to finance construction, because no bank would lend the money.

The appraisal, done by appraiser Morris E. James under contract with the city, was sent to the D.C. Department of Administrative Services last month.